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DAX gains momentum after bullish engulfing

DAX Xetra (cash index)

The bulls fought back well yesterday to post a strong bull candle and a strong recovery signal.

A bullish engulfing (bull key one day reversal) yesterday has been confirmed early today with a strong opening gap higher that has now filled the previous gap at 12,143.

  • This looks to be a strong recovery by the bulls and although there is a gap now open at 12,110 which is around 100 ticks below the current price (an is likely to be filled), the strength of the reaction suggests that the bulls are ready to regain control.

However, there is more that needs to be done in the recovery.

Momentum indicators are ticking higher and if the RSI starts to tick into the high 40s then this would confirm increasing bull control.

  • A band of resistance 12,283/12,379 lies overhead as the next barrier to gains (the higher being the 23.6% Fibonacci retracement of the big sell-off.

On the hourly chart there is certainly an improvement on momentum indicators but the RSI needs to be sustainably into the 60s and Stochastics strong.

  • Resistance at 12,284 is the initial test now of this move?

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At Hantec Markets Ltd we provide an execution only service. Any opinions expressed by analyst Richard Perry should not be construed as investment advice or an investment recommendation. This report does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. Forex and CFDs are leveraged products which can result in losses greater than your initial deposit. Therefore you should only speculate with money that you can afford to lose. Please ensure you fully understand the risks involved, seeking independent advice if necessary prior to entering into such transactions.